Feb 18, 2022 3:55:23 PM
Weekly Market Wrap 18/02/2022
Ongoing developments in the Ukrainian crisis are causing elevated market volatility. Reports on Friday talked of increased shelling between Russian backed rebels and Ukraine, as the Self-proclaimed Republic of Luhansk in eastern Ukraine ordered an evacuation of people to Russia which could form a pretext for an invasion. The FOMC told the market that they are willing to combat the increased levels of inflation, whilst UK retail sales data show a strong bounce back from the effects of Omicron last year.
The S&P 500 fell 0.87% to 4,380.3. Dow x.xx% The US market has been disrupted this week on the news that Russia is in fact adding troops on the Ukrainian border, whereas multiple sources stated that troops were returning to their permanent bases. Markets reacted positively to Wednesday’s FOMC minutes which showed that the Fed is focused on fighting inflation and are expected to end their bond buying program in March as previously planned, although there is a possibility of a 0.50% rate hike in March.
The FTSE 100 ended the week down 1.51% at 7,544. UK retail sales data beat estimates to reveal a 1.9% increase in January 2022, rebounding from a drop of 4% in December 2021 which was caused by the outbreak on the Omicron variant and increased government guidelines. However, the rapid increase in the UK cost of living means the outlook for retailers in the near future is unclear.
European markets fell this week as ongoing uncertainty around whether Russia would invade Ukraine saw investors move away from equities. The Euro Stoxx 50 fell 0.76% this week to 3,734, whilst the CAC 40 dropped 0.79% and the DAX lost 1.81%. However, gains were seen across more defensive sectors and across a number of European companies that have reported strong earnings.
Fixed Income .
The US 10-Year Treasury yield has risen 0.23% to 1.941% after Wednesday’s FOMC minutes reinforced that fed are ready to begin fighting inflation. Markets are pricing in an initial 0.25% rate hike at the Fed’s March meeting, although there is a possibility that the first hike could be 0.50%.
WTI Crude fell 3.73% to 89.56, dropping from recent highs as fears of supply disruption in Russia ease after news that the US and Russian officials will meet next week.
Gold rose 1.4% to $1,896, after reaching $1,900 earlier this week as investors looked to safe haven assets as the Russia-Ukraine situation escalated.
The Week Ahead
Monday – China interest rate decision; UK manufacturing PMI
Tuesday – US housing price index
Wednesday – BoE monetary policy report
Thursday – US initial jobless claims; USD GDP
Friday – Eurozone consumer confidence
*Price changes as of last week’s close unless stated otherwise.